Canary of SA’s coal mines?
A failing Transnet may have necessitated Thungela’s Australian expansion
News of Thungela’s acquisition of a coal mine in Australia did not excite the market on Friday. In fact, the company’s shares closed 2% lower on Friday at R218 a share.
On the face of it, the R4-billion deal to acquire an 85% stake in the Ensham coal mine makes sense. Since it was spun out of Anglo American in mid-2021, the coal miner has made known its ambitions to geographically diversify out of South Africa.
While other coal miners are diversifying into greener businesses, Thungela has assured its shareholders it won’t be straying from the black gold which is expected to enjoy strong prices over the medium term. Demand from coal-fired power plants is likely to persist amid a seemingly bumpy global energy transition away from fossil fuels.
The unenthusiastic share price reaction likely reflects some dividend-drunk shareholder displeasure with an acquisition at a time when coal prices are abnormally high.
Thungela’s diversifying away from South Africa will, however, please those investors who have grown increasingly concerned over logistics challenges in the country. Transnet Freight Rail has failed to turn around its operational performance costing coal exporters billions in lost export opportunities.
Certain Transnet ports are also experiencing persistent challenges too. Thungela, SA’s largest exporter coal producer, would have been able to export 600 000 tonnes of coal were it not for the parastatal’s troubles.
While the mine may insist the deal down under would have happened regardless of SA’s woes, one can’t help but wonder how different our country’s investment case could be if we were able to get things moving again.
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Chart of the day
SA’s trade balance turned negative for the first time in almost three years in December. This was due mostly to a sharp increase in equipment imports. Source: SA Reserve Bank
Number of the day
$118 billion, or R2 trillion
The market value lost by India’s Adani Group since a report by US short seller Hindenburg Research, which accused the Indian giant of widespread fraud and share market manipulation, was released two weeks ago. This is half its total value. Before the crash, Adani’s founder Gautam Adani was richest man in Asia. The company is involved in gas and green energy. The crisis has highlighted strong ties between Prime Minister Narendra Modi and Adani.
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